New Management Technologies Fill Missing Tech Links

By Cihan Cobanoglu, Ph.D., CHTP | April 05, 2012

The results of the 14th Annual Restaurant Technology Study reaffirm signs of a rebounding economy. Across all aspects of business (average guest check, gross revenue, net profitability), restaurateurs reported positive growth compared to last year. The study also recorded an uptick in information technology (IT) spending, which increased in 2012 from 2011. Overall, approximately 30% of restaurant operators have an annual technology budget in excess of $300,000. The biggest share of IT spending in 2012, with 29.5% of the budget, was allocated to hardware. Improving productivity and efficiency continues to be the number one driver for IT projects in 2012.

Examining the technology that restaurateurs use, it is evident that many are not afraid to adopt newer technologies such as mobile payment and cloud-based systems. A majority of the restaurants surveyed (91%) use point of sale systems and 61% integrate it into the cost control system. This is a surprising figure, given the fact that the main cause of restaurant failure is a lack of cost control measures. However, that percentage might be representative of the fact that integrating cost control software to a POS is a much easier prospect than it was in previous years.

Making sense of dollars and cents

In an industry where six out of ten establishments will fail within three years of opening, and profit margins are in the single digits, integrating cost control systems to POS gives restaurant operators several advantages, including the ability to track perpetual inventory (the inventory that the operator should have on hand). Having access to this information at all times enables the operator to track costs on a real time basis and more effectively manage the inventory. Ultimately, the operator will be able to make more informed decisions to control costs before it is too late. Upon integration of these systems, the actual inventory items are deducted as sales occur. This simplifies the ordering process as sold items are automatically placed on the purchase order list.

The study did indicate that more than half of restaurant operators are missing out on a huge opportunity in terms of quality control and management by not integrating online ordering. Not only does this technology allow operators to manage rebates, but it also offers reverse bidding for purchasing. In this system, even small operators can electronically send orders to distributors and vendors to get prices. The software has the capability of sorting bids based on the lowest price quoted and prepares a list of purchase orders from multiple vendors. Any penny saved in this process has a direct impact on the bottom line.

The implementation of bar code and scanner technologies in the inventory process is another growth area for restaurants. Only a quarter of the operators surveyed are currently using bar code systems. These systems are not only very easy to use, but they are low-cost and provide significant time saving features if used with a handheld bar code scanner.

A manual inventory method often results in more time spent finding individual items rather than actually taking an accurate count. Implementing bar code technology can speed up the entire inventory process by at least four-fold.

The restaurant industry is still a follower when it comes to technology. This was to be expected when the price of the latest innovations made them cost prohibitive, however, today’s technology is much more affordable. More importantly, it is much easier and more likely to achieve a return on investment with new operations systems. In my next column I will spend some time on electronic marketing efforts. This is another area where the cost/benefit analysis should be of great interest to all hospitality operators.